Gold futures soared last week as a plunge in U.S. Treasury yields weakened the U.S. Dollar, while driving up demand for dollar-denominated gold. The drop in yields was fueled by concerns over a weakening U.S. economy. Yields were also pressured by dovish comments from U.S. Federal Reserve Chairman Jerome Powell, who opened the door to a sooner-than-expected interest rate cut. Gold was further supported by weaker-than-expected U.S. job market data on Friday.
Last week, August Comex gold futures settled at $1346.10, up $35.00 or +2.67%.
Also giving gold a boost last week was the U.S. threat of tariffs against Mexico. However, on Friday, the U.S. and Mexico reached a deal on immigration, thereby postponing the start of the tariffs on June 10. This is potentially bearish news for gold because it is likely to encourage so-called “safe-haven” buyers to liquidate their long positions. Furthermore, the news should be bullish for the stock market. Increased demand for risky assets could put additional pressure on gold prices.
Weekly Technical Analysis
The main trend is up according to the weekly swing chart. A trade through $1352.70 will reaffirm the uptrend. This could lead to a test of the next main top at $1361.50. This is another trigger point for a potential acceleration into the next main top at $1405.90, followed by the contract high at $1413.30.
The main trend will change to down on a trade through the main bottoms at $1274.60 and $1273.20.
The contract range is $1413.30 to $1202.00. Its retracement zone at $1307.70 to $1332.60 is controlling the longer-term direction of the market.
The minor range is $1202.00 to $1361.50. Its retracement zone at $1281.80 to $1262.90 is support. This zone stopped the selling at $1273.20 and $1274.60.
Weekly Technical Forecast
Based on last week’s price action and the close at $1346.10, the direction of the August Comex gold futures contract this week is likely to be determined by trader reaction to the downtrending Gann angle at $1341.30.
A sustained move over $1341.30 will indicate the presence of buyers. If this move can create enough upside momentum then look for buyers to make a run at $1352.70, followed by $1361.50.
Taking out $1361.50 will reaffirm the uptrend. This could trigger a rally into a downtrending Gann angle at $1377.40.
A sustained move under $1341.30 will signal the presence of sellers. The first downside target is the main Fibonacci level at $1332.60, followed by a steep uptrending Gann angle at $1322.60. Since the main trend is up, we could see a technical bounce on the first test of this angle.
If $1322.60 fails as support then look for the selling to possibly extend into the main 50% level at $1307.70, followed by another uptrending Gann angle at $1298.60.
This article was originally posted on FX Empire